The interbank call-money rate has eased slightly, thanks to the Bangladesh Bank's liquidity support and sluggish credit growth in the country's banking sector.
The overnight call rate stood at 9.96 per cent on Wednesday, compared to more than 10.10 per cent recorded on Thursday last.
The call money rate, which reflects the interest rate on short-term or overnight loans between banks to meet immediate cash needs, has been on a steady rise since June last year, when it was 6.0 per cent only.
The central bankers attributed the recent drop in the rate to liquidity support to some Shariah-based banks by the Bangladesh Bank.
"Previously, these banks borrowed from other banks to meet their requirements," said a senior official at the central bank.
The central bank recently injected Tk 225 billion into the Shariah-based banks, which has impacted the interbank market significantly.
"There is another factor at play," the senior central banker said, adding: "The central bank is now borrowing exactly the amount required by the government, unlike in the past when the government used to take more than the notified amount."
However, commercial bankers remain cautious about the downward trend in the rate. They say the reduction is not significant enough to draw conclusions.
Some foreign banks with surplus liquidity are reportedly offering loans to local banks at lower rates, easing the liquidity pressure in the market, they added.
Syed Mahbubur Rahman, Managing Director and CEO of Mutual Trust Bank PLC (MTB), said the downward trend in the call money rate is a positive sign, reflecting a growing liquidity position in the banking sector.
The central bank data shows that cash outside the banking system decreased by Tk 57.43 billion in October last, bringing the total to Tk 2.78 trillion.
Mr. Rahman further noted that private sector credit growth remains subdued, recording an 8.3 per cent increase in October 2024 compared to the same period last year (2023).
Meanwhile, the government borrowing has declined from its earlier levels, contributing to improved liquidity in the market, he added.
On Wednesday, 62 deals were executed in the overnight call money market at an average rate of 9.96 per cent.
However, short-term interbank rates for longer durations remained above 10 per cent.
The 4-day short notice rate was 10.94 per cent while 5-day short notice rate 10.70 per cent, 8-day short notice rate 12.30 per cent and 14-day short notice rate 12.75 per cent.
On the same day, total transactions in the interbank call money market amounted to Tk 46.60 billion. This figure excludes interbank term loans, which are reported separately.
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